Indian rupee depreciation: What you need to know

Indian rupee

The Indian rupee has seen a sharp fall since the start of this financial year, marking its steepest drop in two years. The slide has been driven by a mix of domestic and global factors.

While the rupee had already been weakening since late last year, most of the heavy depreciation and record lows have come in the current fiscal. In fact, Moneycontrol earlier reported that so far in FY26, the currency has fallen 3.2 percent, its worst performance since FY23.

Back in FY23, the rupee lost 7.78 percent to close at 82.18 against the dollar. Three years earlier in FY20, it had dropped 8.46 percent to close at 75.54. Compared to those declines, this year’s fall isn’t as alarming yet, but it does underline the pressure on the currency.

FAQs on the key reasons for the depreciation:

1. Why did the rupee depreciate? The local currency has depreciated due to US tariffs uncertainties, prolonged Russia–Ukraine war, rising tensions between Israel and Iran, and foreign investors' outflows from the domestic equity market.

2. How much has the rupee depreciated? According to the Bloomberg data, the rupee depreciated to 88.2787 against the greenback on September 12, from 85.5137 on April 2, 2025, registering a fall of 2.77.

3. Is this the highest fall? The current depreciation of the local currency is the highest after two financial years. Rupee has registered its steepest depreciation since FY23, when the home currency depreciated around 7.78 percent. In FY20, it had depreciated 8.46 percent.

4. Is this concerning for India? No. Experts believe that it is not yet a concern for India amid a strong external position underpinned by record-high forex reserves. As of September 5, 2025, India’s foreign exchange reserves stood at $698.268 billion.

5. What is the outlook? Currency experts believe that if the current tariff uncertainty continues, the Indian rupee could weaken further, potentially trading in the 88.80–89.00 range against the US dollar in the near term.